You can get away with raising your prices around once a year in line with inflation rates. That’s according to a June 2021 article from Harvard Business Review, and it’s generally considered to be good advice.
So how else can Australian manufacturers expand their profit margin? Customers will notice cost-cutting using cheaper material, so you’re left with everything between the raw material and finished product.
Put another way, your process defines your profits.
ERP (enterprise resource planning) software provides the invaluable insight you need to make strategic decisions that lead to greater profits in five key ways.
1. Better segmentation
Are you focusing on your high-profit customers? Can you identify the next tier of customers with the latent potential to deliver more profit? Do you know which products yield the highest profit margin?
If you answered “no” to any of those questions, your ERP – if you’re using one – is not delivering value. Being able to segment customers and products according to their ROI (return on investment) is a core function of a high-performing ERP system.
Remember, returning customers are worth 3 to 5 times more than new customers. So the easiest way to increase profit might be simply to focus on nurture existing accounts.
2. Process automation
Automating time-consuming tasks has two benefits. First, it frees up staff time to focus on value-adding activities. Second, it reduces human error (and therefore re-work).
Here are some processes your ERP could be automating:
- Job scheduling
- Payroll
- Quote generation
- Invoice follow-up
- Capacity planning
- Time and attendance tracking
- Leave requests
- Creating work files from quotes
The key to leveraging the potential of an ERP like Jobman is to look closely at operational data, identifying tasks that can be automated and prioritising these according to the highest profit potential.
3. Supply chain management
To tighten your supply chain, you first need to know what products and materials yield the most profits. Then, with an ERP integrated into your operation, you can begin to streamline supplier relationships to deliver products at lower costs.
For example, Jobman will automatically trigger a supplier order when inventory reaches minimum levels. You can also track material costs to see the margin on every job and scrutinise outgoings to track where you might be bleeding cash.
Now combine that insight with automation. For example, if you spot a high-cost material and you have time to negotiate better rates with suppliers, you could end up boosting your profit margin on the very next job.
4. Better inventory management
An ERP provides real-time inventory insight so you can:
- Implement a just-in-time ordering system
- Forecast production timelines
- Identify customer trends
- Cut waste, especially on products with a short shelf life
- Spot bottlenecks and wasted storage space
Minimising stock on hand while streamlining warehouse processes means you can reduce ordering costs, cut waste and still deliver the high-profit products your customers demand.
5. Milestone mapping & target setting
Setting targets, and tracking progress towards those targets, remains an insurmountable challenge for manufacturers without an ERP. Targets without foundation in historical performance are worth very little; how can you know you’re improving if you don’t know where you started?
Jobman centralises all the data management needs to set realistic, achievable targets that move the needle. And you can see how incremental process improvements along the way contribute to building profits – not at the end of the quarter, but at the end of the week.
Add value by investing in ERP
Any value-adding activity – automation, better inventory control, removing bottlenecks, improving customer relationships – requires a fit-for-purpose ERP system. With the right system, you can grow profit margins while simultaneously delivering better products.
Jobman, an ERP for Australian manufacturers and cabinetmakers, is an investment that pays off many times over. Our team works with yours to ensure you get the most out of Jobman and make data-driven decisions to increase your profits.
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